I am really incompetent to answer this question. I do believe that if you are a businessman most of your money (willingly or unwillingly) will be invested in your own business. The greatest wealth has been made by such businessmen by having a concentrated assets. Azim Premji, Ratan Tata, Birla,….
HOWEVER, if you are not a businessman and you are an employee or a professional like a doctor …you need to create a portfolio. Either you go and create a portfolio OR you invest in a mutual fund. And create a portfolio of mutual funds.
Now is the difficult part. How do you do Asset allocation? Well that is tough.
If you do not want to do too much of thinking and you already have some Lic policies, ppf ,etc. do a SIP in one fund like Hdfc Prudence. It is a rock star among balanced funds and gives returns like an equity fund. Do not do any other investments just keep at it. Surely your IFA will feel worried and may suggest more funds, but believe me this is fine.
As your age increases include some more equity funds – one large and mid cap and one small cap fund. That should take care of ALL your asset allocation. You are likely to be in about 70% in equity and 30% in debt. Of course if you take your Provident fund into account, the balance will tilt in favor of debt, but you can live with it.
When you turn say 60 or when you retire, continue with your Hdfc Prudence fund and redeem all other investments. Let your Hdfc prudence investments continue till you are 70 years of age. All your other investments are now in debt, so you would have gone to about 30% in equities and 70% in debt.
Draw from your debt for day to day expenses….and draw down from your equities when the market has given a sensationally good return…and put that amount into a debt scheme with low volatility and low duration.
Please do not confuse asset allocation to diversification. In a portfolio like this Prashant Jain is handling your diversification, Subramoney has done your asset allocation.
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